In recent months, the financial world has cast its gaze upon Hong Kong, reigniting interest in its stock market and investmentsMajor investment firms such as Goldman Sachs and Morgan Stanley have notably adjusted their strategies, displaying newfound optimism towards Chinese assetsThis wave of positivity has culminated in a remarkable surge in the Hong Kong stock market, specifically the Hang Seng Index and the Hang Seng Tech Index, which have demonstrated impressive performance since the beginning of 2025, raising by 17.07% and 31.14% respectively, positioning them among the leading global indices.
On February 21, Hong Kong's stock market experienced a strong upward movement; the Hang Seng Index soared by 3.99%, reaching a new three-year high, while the Hang Seng Tech Index advanced by 6.53% on the same dayThis bullish trend is a continuation of the explosive growth observed in early 2025, where both indices have consistently outperformed other global financial markets.
This resurgence can be attributed to the persuasive interventions by influential Wall Street analystsGoldman Sachs highlighted during a recent closed-door conference that Chinese internet stocks are currently undervalued and forecasted an increase of 14% for the MSCI China Index by the end of 2025, with an optimistic projection suggesting a potential rise of 28%. Morgan Stanley, aligning itself with this sentiment, expects a modest 4% growth for the MSCI China Index in the short termSuch endorsements from major financial institutions serve to further bolster investor confidence globally.
The underlying performance of Chinese tech firms significantly contributes to the buoyancy of the Hong Kong marketJust days ago, Alibaba Group reported a robust fiscal Q3 performance for 2025, divulging revenues of 280.15 billion yuan—a year-on-year growth of 8%—alongside a staggering 239% increase in net profit attributable to shareholdersSuch impressive numbers not only underscore the vitality of Chinese tech stocks but also emphasize their importance as catalysts for the Hong Kong market's vigorous ascent.
When assessing valuation levels, it becomes evident that even amidst rising stock prices, the Hong Kong market retains characteristics of a "value play" in comparison to its global counterparts
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As of February 20, the Price-to-Earnings ratio (P/E) of the Hang Seng Index stood at a low 10.47, while the Hang Seng Tech Index was at 26.51. In stark contrast, the P/E ratios for the S&P 500, Dow Jones, and NASDAQ were significantly higher, at 28.10, 32.42, and an astonishing 46.09 respectivelyThis substantial disparity in valuation presents a compelling case for investors eyeing Hong Kong-based assets.
Historically, foreign capital has also played a critical role in energizing the Hong Kong stock marketThe latest indications reveal that foreign funds are beginning to reevaluate their perspectives concerning Chinese assetsMorgan Stanley recently adopted a more favorable outlook, upgrading its stance on the MSCI China Index from "underweight" to "neutral," now projecting a target of 77 points compared to the previous 63 pointsConcurrently, the firm has adjusted its year-end targets for both the Hang Seng China Enterprises Index and the Hang Seng Index itself, painting a bullish portrait for the future.
Similarly, financial giants like Deutsche Bank, Goldman Sachs, and UBS have joined the ranks of those supportive of the burgeoning Chinese market, with Goldman Sachs raising its one-year target for the MSCI China Index to 85. This positive sentiment is further reflected in significant inflows of capital; research from CITIC Securities indicates that approximately HKD 13 billion flowed back into the Hong Kong stock market during a short period between January 24 and February 13, primarily targeting sectors like technology and consumption that represent considerable valuation discounts.
Key players such as JP Morgan have also been amplifying their stakes in the Hong Kong market, as evident in their recent acquisition of substantial amounts of stock in companies like SF Holding and Weichai PowerIn tandem, domestic capital flows have experienced an uptick, with considerable net purchases in leading firms like Alibaba and Semiconductor Manufacturing International Corporation on February 21 alone.
Amid this dual influx of external and internal investment, the Hong Kong stock market continues to skate on a trajectory of growth
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On the same day witnessing the Hang Seng Index’s rise, domestic indices also reflected positive movements—Shanghai and Shenzhen indices saw respective increases of 0.85% and 1.82%.
Further exacerbating this dynamic is the groundbreaking technological advancement emerging from China's innovation sectorProducts leveraging AI technology have not only dazzled the domestic audience but are also positioning themselves as centerpieces in the global marketBreakthroughs like the DeepSeek-R1 model and influential AXI models tailored for Apple devices are capturing international attention, conveying a new narrative for Chinese technology and market potential.
Companies leveraging AI have been positioned as the driving force behind the momentum observed in Hong KongReports suggest that enhanced adoption of AI could boost annual earnings per share of Chinese companies by 2.5% over the next decade, leading to further increases in foreign capital influx, estimated to breach USD 200 billionAnalysts refer to this moment as China’s 'Sputnik' moment, indicating transformative potential in concepts of intellectual property and asset valuation.
Add to this the impressive financial report from Bilibili, showcasing revenue that exceeded estimates, and the picture presents a vividly optimistic outlook for Hong Kong's growth narrativeAs global fund managers recalibrate their portfolios, they are increasingly turning their eyes towards Hong Kong, recognizing it as an attractive alternative amidst a waning interest in American stocks.
In stark contrast to Hong Kong’s performance, the U.S. stock market has faced a noticeable decline, as evidenced by the drop in the Dow Jones Industrial Average and the NASDAQ CompositeAs retail and institutional buyers show signs of fatigue, funds appear to be withdrawing from the U.S. market, reflected in reports from significant firms such as Bridgewater, which have reduced their stakes in major tech companies like Apple and Amazon.
This broader shift represents a significant redistribution of capital on a global scale
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